At the risk of sounding like the black knight from Monty Python and the Holy Grail, I'm taking the view that the opening plunge of 61 points is a mere flesh wound. My scenario of support at 4710 vanished on the open as the market quickly moved to 4670 where it sits now but after a choppy 5 wave pullback in the market, I still think that we're liable to see support hold on a daily basis.
The US indices fell by 3 quarters of a percent while continental Europe fell 1% or more with the FTSE just a shade down. Spain is the next, and by far the biggest, domino expected to fall as the debt crisis unfolds. Gold rose over 1%, base metals were steady to up and oil was firmer too while the AUD held its ground. So the portents were not all bad for the Australian market despite the early reaction.
I've been a fan of LNC for a while and with coal prices stubbornly high, they're sitting on some juicy assets. The stock has been ranging for a while and that range is narrowing. Nevertheless, the price is tending towards the top of that band and after a 7 day retracement, the stock has traded above Friday's high. I'm hoping for a higher low here and have bought a few at 281.
12.04 There might soon be a test of daily support at 4840 as the market is now down 74 at 4658. Asian markets are around 1.5% off so there's no support there. As ever, the smaller cap stocks I'm trading in are moving more than the market but given that the main pressure is on the financial sector, the damage is limited.
1.21 There's still a pall over the market as a softening Chinese PMI figure has not helped sentiment. The AUD is weakening gently which is a medium term plus and it's possible that the PMI number is indicative that the Chinese authorities are successfully managing a slowdown rather than orchestrating a crash but for now, the glass is half empty.
I have one position which I need to cut and that's a bit of a surprise given the good lead from gold overnight. IAU has failed to hold support at 180 and has actually slipped as low as 174.5 on very light volume. I need to sell out today as I find that where the c wave retracement is much weaker than the a wave, as it is in this case, the subsequent falls can be pretty sharp.
3.02 The Asx 200 is inexorably closing in on support. There seems to be general surprise at the weakness across the board today throughout the region. Once again, it appears more like a buyers strike than serious liquidation and this approach is rational to me, stocks are in a downgrade cycle, rates have not topped and overseas holders are liquidating commodities and shorting our banks on the basis of wholesale funding issues and expensive real estate. I have a pool of money I want to allocate to some longer term trading but don't see the need to step in yet.
3.54 Out of half of the IAU on a minor rally to 177.5 but have held the rest as I think I can get them out at 179-181. The selling is driven by general market weakness and a large overnight fall is being anticipated when only a moderate one is so far indicated by the European opening calls and US futures.
4.06 Actually, the German and French markets are set to open down 1% plus, it's the UK market with its resource sector that is set to open down a comparatively healthy 41 points, on the back of relative outperformance on Friday.
4.12 The close was 4643 which is 1.6 points higher than last Monday's low of 4641.4 and what's more, last Monday's closing value was a tad higher at 4650. I'm close to stops in LYC, OZL and PDN and past the cut level in IAU with half done. My other long is LNC which had a good day and finished up 4 at 282. No shorts, unfortunately.
Here's the updated XJO daily.
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